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Aerial view of downtown Chattanooga.

Lowest startup cost cities

1. Chattanooga

2. Wichita, Kan.

3. Greensboro, N.C.

4. Columbia, S.C.

5. Knoxville

6. Little Rock, Ark.

7. Memphis

8. Lexington, Ky.

9. Orlando, Fla.

10. Winston-Salem, N.C.

Source: SmartAssets study of 80 U.S. cities for costs of starting a business

Chattanooga is the lowest cost city in America to start a new business, according to a new study by the online personal finance service SmartAssets.

For the second consecutive year, Chattanooga was ranked as the cheapest among the 80 largest U.S. cities studied by SmartAssets for the first-year costs of starting a business with five employees operating in a 1,000-square-foot commercial office.

Chattanooga had the lowest labor costs of any city and offered below average costs for office space, legal costs, filing fees and utilities compared with most other cities in the study.

Kathryn Menchetti, director of small business and entrepreneurship for the Chattanooga Area Chamber of Commerce, said the 127,000-square-foot INCubator on the North Shore is the largest business incubator in Tennessee, housing about 70 businesses in low-cost, subsidized office space and providing free or low-cost training, legal assistance and expert counseling for hundreds of businesses. Over the past three decades, more than 540 businesses have "graduated" from the incubator and moved into their own facilities after being helped and nurtured in a lower-cost setting during their early stages.

"Chattanooga has the fastest and lowest cost high-speed broadband service in the country and our business development center offers a variety of low cost services and help to keep the startup costs for many businesses low when they are often needing all the capital they can scrape together to build their new businesses. This is got to be one of the most affordable places anywhere to get a business started and it's only a fraction of what it costs on the West Coast where a lot of businesses are not trying to get started."

Amanda Dixon, a writer for SmartAssets, said "Tennessee takes the cake" as home to three of the top 10 cities with the lowest startup costs — Chatanooga, Knoxville and Memphis.

But Tennessee's fastest growing major city right now, Nashville, tends to be more expensive.

Dixon said the study suggests startups struggling for initial capital should stay away from big cities where costs tend to be higher.

"While you may have access to a bigger network and more resources, you'll need to be willing to pay the price if you want to launch a startup somewhere like Washington D.C., or New York City," she said.

SmartAssets calculates it would could $225,442 in the first year for labor, office space and all of the other filing, legal and utility expenses for a business with five employees in a 1,000-square-foot office in Chattanooga.

That's only about half the estimated $439,831 bill for a similar startup business in San Jose, Calif., — the most expensive city for starting a business.

SmartAssets spokesperson Kara Gibson said those who start businesses in Chattanooga "are in good company.

"Many startups and accelerators operate there, including the Lamp Post Group and Gigtank 365," she said.

Sybil Topel, vice president of marketing and communications for the Chattanooga Area Chamber of Commerce, said Chattanooga tends to be a more supportive community than most for startups with a variety of programs and facilities designed to encourage entrepreneurs, tech startups and other business initiatives.

"Whether a start-up begins in the INCubator at the Hamilton County Business Development Center or in the Edney Building in the Innovation District, they're bound to get the support, encouragement and resources they need in Chattanooga to succeed," she said. "Entrepreneurs who invest here often talk about our low "burn rate" and how much that gives them an edge. It's great to be No. 1."

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.

 

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